George H. Whitney et al. vs. Frederic E. Cady

George H. Whitney et al. vs. Frederic E. Cady. First Judicial District, Hartford, October Term, 1898. Andbews, 0. J., Tobkance, Baldwin, Hamebsley and Hall, Js. A contract to assume and pay certain indebtedness and save the original debtor harmless therefor, is more than a mere promise of indemnity, and is broken by the promisor’s refusal to pay. The plaintiffs, W & H, while partners, sold out their business to the defendant, who agreed to assume and pay the firm indebtedness. As part of the consideration for the defendant’s purchase and undertaking, the contract stipulated that IF should not engage in a similar business in competition with the defendant for the term of five years. In an action to enforce the specific performance of the defendant’s promise to pay the copartnership debts, the latter pleaded that IF had violated the agreement by engaging in business in competition with him, to his great loss. Held that this allegation was material to the defendant’s defense, and that the trial court erred in expunging it upon motion. A motion to expunge is not adapted to test the substantial rights of parties. Its main use is to enable the court to purge the record of impertinence and surplusage. Submitted on briefs Oct. 4th decided Nov. 11th, 1898. Action to recover damages for a breach of contract to assume and discharge the copartnership indebtedness of the plaintiffs, brought to the Superior Court in Litchfield County and tried to the court, George W. Wheeler, J., after the second defense of the defendant had been expunged from his answer by Ralph Wheeler, J.; facts found and judgment rendered for the plaintiffs, and appeal by the defendant for alleged errors of the court in expunging his second defense. Error and new trial granted. On November 15th, 1894, the defendant and the plaintiff Whitney were in partnership under the firm name of Cady & Whitney. On that day they sold their business to the two plaintiffs, who then formed a partnership under the firm name of Whitney & Hines. The new partnership earned on their business until the 28th of January, 1895, when they sold out to the defendant. This transaction was witnessed by a written agreement as follows:— “Know all men by these presents that we, George H. Whitney and John T. Hines, both of Riverton, Litchfield County, Connecticut, partners in company under the firm name and style of Whitney and Hines, for the consideration of a valuable sum in dollars and the performance of stipulation and agreements hereinafter contained, received and to be received to our full satisfaction of Frederic E. Cady of said Riverton, do hereby sell, bargain, transfer and convey unto the said Frederic E. Cady all of the goods, wares and merchandise, store fixtures and furniture belonging to us, said Whitney & Hines, and contained in the store in said Riverton now occupied by us; also all book accounts, choses in action and accounts and bills receivable due to us on account of said store business, also our goodwill; to have and to hold the same to him the said vendee, his executor, administrator and assigns forever, to him and their own proper use and behoof. And we the said vendors, do for ourselves, our heirs, executors and administrators, covenant and agree with said vendee to warrant and defend said property to him, the said vendee, against all persons whatever, together with full power and authority to collect said book accounts, choses in action, bills and accounts receivable, and to receipt therefor. As an additional consideration for the above conveyance the said- vendee has agreed and does hereby agree to assume and to pay and does hereby assume and agree to pay all of said Whitney and Hines’ liabilities and bills, debts and claims owing from them, said Whitney & Hines, to all persons, parties and copartnerships whatsoever, and to save them harmless therefor. The said George H. Whitney has agreed and does hereby agree not to engage in the mercantile business, such as said Whitney & Hines have been conducting and hereby sell to said Cady, in said Riverton, for the period and term of five years from the date hereof; nor is he, said Whitney, for and during said period, to invest his money in said business and conduct or have the same conducted by any other person, for him or for his benefit, and in opposition or competition to said Gady. In witness whereof we have hereunto set our hands at Winchester, Conn., this 28th day of January, A. D. 1895, and agree that this instrument shall remain in the possession of Samuel A. Herman. “Whitney & Hines. “ Witness, Samuel A. Herman. “ I hereby accept the above instrument and consent and assent and agree to all of the stipulations contained therein. “Frederic E. Cady. “ Witness, Samuel A. Herman.” The plaintiffs, in part execution of this agreement, delivered to the defendant possession of the store occupied by them, the goods and other contents of the store, and their book accounts and bills receivable. The defendant, in pursuance of the agreement, proceeded to collect the bills receivable, to sell the goods, and to pay the partnership debts and liabilities of the plaintiffs, until March, 1895, when, as the defendant claimed, the plaintiff Whitney engaged in business in opposition'to the defendant, in violation of the agreement: and the defendant then refused to pay the liabilities of the plaintiffs remaining unpaid. On May 18th, 1895, the plaintiffs brought this suit. The complaint alleges an agreement as follows: “ On or about the 28th of January, 1895, the plaintiffs sold and delivered to the defendant aR of the goods, wares, merchandise, store fixtures and furniture then belonging to the plaintiffs and contained in the store in the village of Riverton then occupied by said plaintiffs; also all book accounts, choses in action, and accounts and bills receivable then due to the plaintiffs on account of said store business ; and in part consideration therefor the defendant then and there agreed to pay all said plaintiffs’ liabilities, bills, debts and claims owing from them to the persons, parties and copartnerships whatsoever, and to save them harmless therefrom.” The complaint then alleges that the defendant has refused to pay certain of the liabilities he promised to pay; that bills amounting to $1,800 remain unpaid; and that civil actions have been brought against the plaintiffs for the recovery of these unpaid bills. The prayer for relief claims damages, and a specific performance of the defendant’s agreement to pay the plaintiffs’ liabilities. To this complaint the defendant demurred, mainly on the ground that the defendant’s contract was one of indemnity, and the plaintiffs had not as yet suffered damage by its breach. The court ('Elmer, </.) overruled the demurrer. The defendant then answered, admitting certain paragraphs of the complaint, denying others, and alleging that the agreement relied on by the plaintiffs was in writing, and setting out the written agreement. The answer states a second defense as follows: “1. The first defense is made a part of this defense. 2. On the day of March, 1895, or thereabouts, and while the defendant was in the faithful performance of his agreement, the plaintiff Whitney engaged in the mercantile business in said Riverton, which business was of the same kind as that bought by the defendant from the plaintiffs, and invested money therein, and had the same conducted by another or others for himself and for his benefit, and in opposition and competition to the defendant, and continued to be engaged or interested in said business for some months, or until July, 1895, all in violation of his agreement thereinbefore referred to, and to the great damage and prejudice of the defendant.” The plaintiffs moved to strike out paragraph two of the second defense, as impertinent; and this motion the court (Ralph Wheeler, V.) granted. Afterwards the parties went to trial on the other issues raised by the answer. The court rendered judgment for the plaintiffs to recover $1,456.61 damages, made a finding of facts, and the defendant appealed, assigning as errors that the court erred in overruling the demurrer, and in granting the motion to expunge. William 0. Case, for the appellant (defendant). This act of Whitney was the defense of the defendant, and his sole defense. He entered into the agreement on January 28th, 1895, in consideration of the express stipulation therein contained, that Whitney should not re-engage in business in Riverton, and the agreement of which this was a constituent part was signed by Whitney & Hines, and as signed by them submitted to the defendant, who assented to and accepted all the stipulations therein contained. This was a partnership agreement binding both Whitney & Hines, and was a proper and sufficient defense. Boutelle v. Smith, 116 Mass. 114; Palmer v. Mallet, cited in 2 Lind, on Part. p. 487. Samuel A. Herman, for the appellees (plaintiffs). The defendant’s promise was not exclusively one of indemnity, but also a promise to pay. Stout v. Folger, 34 Iowa, 71; Locke v. Homer, 131 Mass. 99; Booth v. Starr, 1 Conn. 244; Lathrop v. Atwood, 21 id. 117; Redfield v. Haight, 27 id. 31; Foster v. Atwater, 42 id. 253. The plaintiffs’ motion to expunge was correctly decided by the court, as the agreement in restraint of trade is the individual agreement of George H. Whitney, and not that of the copartnership. An individual liability of a partner cannot be set off or recouped against a copartnership claim. Gen. Stat. § 1016 ; Pitkin v. Pitkin, 8 Conn. 325; Francis v. Rand, 7 id. 221; Palmer v. Green, 6 id. 14; Atkins v. Churchill, 19 id. 394; Synder v. Spurr, 33 id. 407. An analysis of the instrument will demonstrate that it was George H. Whitney, individually, and not Whitney & Hines, that was to refrain from trade as therein provided. [MAJORITY — Hamersley, J.] Hamersley, J. The demurrer was properly overruled. The contract set up in the complaint is not merely a promise to idemnify; it is also an express promise to pay. In such case a refusal to pay is a breach of the contract. Lathrop v. Atwood, 21 Conn. *117, *123. The court erred in expunging paragraph two of the second defense. (The paragraph, however, is improperly pleaded as a second defense; it should have been added to the previous allegations of the answer.) The guaranty against competition from the plaintiff Whitney, was a material part of the consideration for the defendant’s promises to the firm. The agreement is made by "Whitney & Hines as partners; they agree to sell their stock in trade, assets and goodwill, to the defendant, for a cash payment and “ the performance of stipulation and agreements hereinafter contained; ” they then say, “ as an additional consideration for the above conveyance, the said vendee has agreed ” to pay the firm liabilities, and the said Whitney has agreed not to engage in the mercantile business such as Whitney & Hines have been conducting “ and hereby sell to said Cady.” This document they sign with their firm name. The defendant’s assent is as follows: “ I hereby accept the above instrument and con sent and assent and agree to all of the stipulations contained therein.” Certainly this is, at least, equivalent to a sale by Whitney & Hines and a purchase by Cady, upon the part consideration that the business such as that sold shall not for a certain period be carried on by one of the partners in opposition to Cady. If the agreement had promised that neither partner should interfere, the consideration would be enlarged, but it would not be any more truly a consideration for the firm contract. The defendant alleges the failure of this consideration. A partial failure of consideration may be material in estimating damages in an action on the contract. Moore v. Ellsworth, 3 Conn. 483, 488; Cook v. Mix, 11 id. 432, 438; Andrews v. Wheaton, 23 id. 112, 118. Even if Hines may not be liable for all damages accruing to Cady from Whitney’s conduct, he cannot, jointly with Whitney, claim a specific performance of the agreement, if Whitney’s conduct in violation of the agreement has made its performance as a whole impossible, and its partial performance inequitable. We think the allegation expunged was material to a proper defense. If there were a doubt as to this, the doubt would surely be a substantial one upon which the defendant would be entitled to be heard in full on demurrer; it is not one of those questions that may be summarily disposed of on a motion to expunge. Such motion is outside the regular pleadings in a cause. It was not intended and is not adapted to test the substantial rights of parties; its main use is to enable the court to purge the record of impertinence and surplusage. Practice Act, p. 4, § 10. Granting the motion may be discretionary. Bassett v. Shares, 63 Conn. 39, 42. To reject, on such a motion, substantial claims of a party, may practically be depriving him of his day in court. There is error, the judgment of the Superior Court is set aside and a new trial granted. In this opinion the other judges concurred.